Gold: A Different Point of View

30 jun 2017

I haven't published many ideas on TV besides my occasional take on Bitcoin. At the beginning of the year, I decided to learn how to trade commodities though, so naturally I am observing the commodities markets much more closely these days.
Yesterday, when I was starring at the XAUUSD chart for the hundredths time wondering if the next big move will be to the upside or the downside, I decided to create a "Gold Index" in the hope that this would give me a different perspective on the market. Amazingly what emerged was this almost picture-perfect example of a H&S pattern that you can see in the chart above.
I am a little short on time right now, but will add more comments later on.

1 jul 2017

Nota

A quick note regarding the formula:
The basket of currencies is the same as used by the FXCM Dollar Index (us.spindices.com/documents/methodologies/methodology-dj-fxcm.pdf), but is calculated simply as the geometric mean with each currency given the same weight.
(The 0.5 constant factor is just there to adjust the scale a little.)

1 jul 2017

Nota

Note too how the decline in November and December 2016 looks much more "well behaved", stopping pretty much exactly where you would expect it to stop (structure to the left):

3 jul 2017

Nota

Wow, what a day so far! Just wondering how many are seeing this:

17 jul 2017

Nota

PA on the 1hr chart:


The nice green candle last Friday on the XAUUSD chart was more a case of Gold being weak, but the Dollar being weaker. I wonder how many traders who went on long on seeing this thought about it this way. ("Looking good. Gold may be weak, but the Dollar is even weaker, so I am going to buy some Gold.")

17 jul 2017

Nota

The 0.768 fib retracement (blue dashed line) is measured from the Dec 15 low to the April 17 high btw.

18 jul 2017

Nota

I just realized that I was using a different chart for the snapshots above where I use 0.25 as the factor.

19 jul 2017

Nota

Just playing around with the numbers. Consider this:



Assuming gold is forming a bottom at the 0.786 fib right now and assuming it would go up to the 1.27 extension (roughly 2130 on this index), then depending on the Dollar:

(1) If the Dollar would remain on the same level as today when the index reaches 2130, then XAUUSD would go as high as 1370.

(2) If the Dollar would return to strength and go back to the level it was at the beginning of the year when the index reaches 2130, then XAUUSD would go to 1268.